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It's not that great for the economy. Economies go great when people are spending money. If a large part of your discretionary income goes to paying off student
by imron 10y ago
It's not that great for the economy.
Economies go great when people are spending money. If a large part of your discretionary income goes to paying off student loans instead of spending on other things, and you put off buying a house or having children due to financial insecurity caused by student loans, then the economy suffers.
- kakarot 10y agoI think he has confused the US economy with its controlling parties.
- velodrome 10y agoAgreed. The US is primarily consumption driven economy. This could lead to behavioral conditioning that could affect future growth (e.g. depression era, silent generation). https://blog.dol.gov/2016/11/03/spending-habits-generation https://blog.dol.gov/2016/11/03/spending-habits-generation https://medium.com/generations-of-spending/meager-spending-and-the-silent-generation-9d71a696630#.98vv4byl4 https://medium.com/generations-of-spending/meager-spending-a... Those of the silent generation are what can be most accurately described as frugal spendors. Again, this tendency is rooted in their surroundings as they grew and developed within the society around them that was facing hard and desperate times.
- tedsanders 10y agoYour comment is full of assertions, but not evidence or explanation. My own assertions: (1) GDP measures production. If debtors are incentived to produce more, GDP rises. (2) The spending of debtors doesn't fall. It is just directed toward different sectors (education and financial products instead of housing, etc.). (3) Every dollar lost by a debtor is a dollar earned by a creditor. These dollars don't disappear from the system. And even if creditors tend to churn money less than debtors, inflation targeting by the Fed should fully counter any changes in the aggregate velocity of money. Now, it's possible you're right and I'm wrong. But I think it takes a much more sophisticated (and justified) argument than what you are asserting.
- 19238998191 10y agoI agree that a sophisticated argument would take longer. Regarding (3): The money does not disappear, but what is done with it? Already excess money in the hands of the 1% is just going into real estate, the stock market and stupid VC companies. All this is not particularly good for the real economy.
- tedsanders 10y agoFYI, this is a fallacy. Money cannot "go into" an asset, in aggregate. Every buyer is always matched with a seller. For example, I have heard people say that in the crash of 2008 there was more selling of stock than buying of stock. But that would have been impossible. Each time a dollar was collected from selling a stock, there was a dollar spent buying that stock. They exactly equal. Money cannot go into assets, in aggregate. This is of course different from personal experience, where exchanges are essentially one-sided, not two-sided. An individual can exchange money for property. But a closed economy cannot.
- RobertoG 10y agoTrue. But that only describe the private actors in an economy. In the same way that money come from the state it can disappear there. The state can decide that "running deficits" is bad and start to destroy money running a surplus, frequently, when what you need is the opposite, like currently in the Euro-zone.
- tedsanders 10y agoRunning a budget surplus doesn't mean that money is destroyed. Also, the claim that the Euro-zone needs deficits is a highly contentious point, and not at all obvious or a consensus. Asserting it rather than arguing it does a disservice to the subtleties.
- RobertoG 10y ago"Running a budget surplus doesn't mean that money is destroyed." What it means, then?